Sunday, April 29, 2012

Evolution of industrial policy in India, China and Germany

The economies that liberalized early on with strategic support to boost capabilities and competitiveness of industries also achieved high growth rate and high prosperity. Germany liberalized in 1950s, China in 1978, and India in 1992. [Nepal is trailing far behind in comparison to these economies—even when compared to the Indian economy as it liberalized its economy in tandem with the liberalization drive in the Southern neighbor. Here and here are two articles related to industrial policy in Nepal.]



Chart source is WEF

This statement by Dani Rodrik is highly relevant here: “The right model for industrial policy is not that of an autonomous government applying Pigovian taxes or subsidies (i.e. lump sum taxes or subsidies), but of strategic collaboration between the private sector and the government with the aim of uncovering where the most significant obstacles to restructuring lie and what type of interventions are most likely to remove them.”